ERP Risks: There are Some Things ERP Software Consultants and Vendors Don't Want You to Know

In my first blog entry I addressed the concept of taking ERP project ownership to put the organization in control of their project destiny. Often the alternative is to hire an army of software consultants, throw a few employees at the project and hope for the best. No doubt there will always be organizations with plenty of money to waste. But the notion that consultants or the software vendor can be the “de facto” owner of your project is a naïve concept but also a very dangerous one.

The reality is the client will always assume the lion’s share of ERP project risks, one way or another. This is true regardless of the software package you selected, the experience of your consultants and no matter how you structure the contract language. In the end, your organization will live with the results and, if things turn ugly, will have less leverage than you might think.

In many ways we need to redefine the meaning of ERP risk management. It can no longer be viewed as a separate line item in the project plan or a one-time brainstorming session. When you are wrestling an 800LB gorilla like ERP, there is inherent risk in almost everything you do.

To put it more simply, organizations must become more educated and make informed project management decisions everyday. Perhaps, this is the reason why the promise of ERP remains elusive to many.

The first step in taking ownership is the realization that consultants and software vendors must be managed. In my 25 years of doing ERP I have come to the crazy conclusion there are some things consultants and software vendors really don’t want you to know. This is not a question of “evil” intent or an industry-wide conspiracy to keep you in the dark. However, it is hard to avoid the basic fact that the less you know the more money they make.

Of course there is nothing wrong with making money. But in industry today when consulting costs average up to 60% of the total ERP project budget, or when necessary (and extensive) software modifications are common place, it is time someone did more than just raise the red flag. The question is: who solely has your best interest in mind?

For instance when evaluating ERP software how many vendors are eager to tell you all the things their software doesn’t do? Software demonstrations often turn into nothing more than a beauty contest rather than focusing on functionality you really need to run your business.

When attempting to understand what is behind the curtain, most vendors play a shell game to conceal software limitations. Client software functionality questions that result in simple vendor answers such as: “it could”, “in the future”, "minor change" or “I’ll get back with you”, typically mean the software doesn’t do any of it and never will.

While everyone has a list of software requirements, scripts and business scenarios for the vendor to demonstrate, most vendors agree with what a former US president once said, “It all depends on what your definition of “is” is”.

Sure, ERP software is usually not the reason for outright project failure. There are plenty of good ERP packages out there and most contain “best practices”. However, whose best practice is the multi-million dollar question. Taking a blind leap of faith in this area may be the last leap you ever take.

Also do not get too excited about seeing your company's terminology on menus and screens, or part numbers in the demo system. In my opinion this practice can be downright deceitful.

When it comes to the underlying technologies, stability and integration of any package, there are reasons why some software vendors prefer your IT department is not involved with the evaluation.

Don’t worry, you will get your free shirt, pen and white paper, and maybe a trip to the national user conference. However, when a peer asks the vendor a tough question during the evaluation, the hope of the vendor is you will dismiss the question for them.

We can talk all day about vendor partnerships and future software functionality. But in the heat of an implementation, and when the software doesn’t have half the capabilities advertised, you and your organization are in deep trouble. In my next blog we address why ERP software consultants must be managed.

Steven Phillips is an ERP professional with over 27 years of implementation experience. He is the author of the book “Control Your ERP Destiny”, one of the best selling ERP titles. The book is available at Amazon, Google Play, Apple iBooks, Barnes & Noble, Koboand through many other international booksellers.

I am ERP consultant, and furthermore in charge of pre-sales on SAP projects. However, I don't consider me as a lier, nor a robber or some kind of advertiser for the editor.

You're wright when saying the editor's presales won't highlight in the first place the features not covered by their software. Look, they are just not here for that !!!

If he is honest enough, though, a good pre-sales will tell you what turn-arround, enhancement, or specific development is needed to cover your requirement, and will provide you with an estimation of the cost for it.

There I see some interest to have a consulting company associated to the bid. Too many customers make first the choice of the software by themselves, then try to identify the solution, and then finally challenge a consulting company for "solution" (or far from it) implementation, at the tbest price of course. Most of them complain on forums about how irresponsible ERP consultants can be.

You're right : Consulting companies take less risks than their client in implementing an ERP. The risk to see you insulted and treated as completely irresponsible exists however. In th other sense, when you have the chance to design the good target, at the right price, from the start, you get chances to meet some more success, even if implementing an ERP is never absolutely dreamlike.

I think you get the right answers if the questions are well defined, precise and correctly raised. A bad answer is an indication to seek more clarifications and if still not satisfied, to run away, and fast. The choice is no longer available after selecting a product and your implementation partner. This is what managing a business involves, including any project, ERP implementation. All pre-sales personnel are very knowledgeable and making an effort to sell, not to point out their weaknesses.

Change management is almost always a big piece, still many organizations fail to grasp its significance. During different stages, key personnel and controls go missing, decisions are left to consultants or employees who do not have the required knowledge. Budgets and timeline get emphasized over what needs to occur. I have seen very poor training, support structures not defined, even requirements being redefined well past the blueprint stage. All these are very much examples of poor management, one decision at a time.

In contrast, I have seen organizations getting prepared, hiring good people before they start, learning the pitfalls and even saving money in the process, while getting the best quality of output.

Thanks for your input. My comment about software vendors not telling you "all the things their software doesn't do" was an attempt at a little dry humor to make a point. I was not implying that vendors will literally walk in the door with a powerpoint explaining their weaknesses in order to disqualify themselves! But it does highlight the fact that organizations must always be on the look out for their own best interest and make absolutely no assumptions(because software vendors are certainly looking out for their interest). If they were not, why not explain all the limitations up-front.

appreciate the frankness. but correctly the onus is ultimately on the company rather tahn on the vendor and the company jolly well understand this - issue again is does the company have the internal skill sets to understand what "ownership" would mean in these situations.

I think the point is to say that if you are counting on someone else to make you successful, you better forget it. Unfortunately the "they will take care of us" mindset is very common in the ERP industry and we continue to get the same old disappointing results (read the surveys).

"Ownership" starts with being a little smarter and I disagree that it takes some special skill set for a management team to take common sense actions to put a project on the track for success and keep it there. The purpose of my blog is to educated the practitioner so they understand there really is a choice (you can be more independent and here is how). The how part is coming.

Sad to learn that after more than +20 years of ERP implementation and thousands of projects the basic issues are still open. I would expect some better processes for decision making and implementation of these projects. From my experience it is not an IT issue, nor should it be blames on consultants or SW vendors. Success or failure of ERP projects boils down to top management taking responsibility for the project and leading its implementation in the organization.

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Street Smart ERP is for organizations that want to take charge of their ERP projects to drive success. If you like my blog, you ...
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Street Smart ERP is for organizations that want to take charge of their ERP projects to drive success. If you like my blog, you will love my new book "Control Your ERP Destiny". It is endorsed by R “Ray” Wang, Tom F. Wallace, and Andy Klee. The book was Amazon's No. 1 new release in the Computer and Technology Project Management category in June 2012 and is currently one of the top two selling ERP titles. In addition to Amazon, it is available at Apple iBooks, Barnes&Noble, Kobo, Google Books and many other international booksellers. The paperback version can also be purchased directly from the publisher at the lowest price by contacting Steve at stevphillips1@gmail.com.
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